HOG » Topics » Cost Structure

This excerpt taken from the HOG 8-K filed Jul 16, 2009.

Cost Structure

        The Company earlier this year announced plans to consolidate its two Milwaukee-area powertrain (engine and transmission) plants into one facility; consolidate paint and frame operations at its York, Pa. facilities into one plant; and close its Franklin, Wis. Parts and Accessories distribution center and consolidate those operations with General Merchandise distribution through a third-party logistics company. In April, the Company completed the transition of its U.S. transportation fleet operations to a third-party provider as part of its restructuring initiatives.

        Powertrain Consolidation Accelerated. Production shutdowns and line rate adjustments will be implemented at Harley-Davidson powertrain operations in Menomonee Falls and Wauwatosa, Wis., and at motorcycle assembly operations in York, Pa. and Kansas City, Mo., to achieve the newly-announced unit volume reduction. As a result of the volume reduction and production shutdowns, the Company expects to accelerate and substantially complete the planned consolidation of the powertrain operations by mid-2010.

        Sportster® and V-Rod® motorcycle final assembly operations and V-Rod motorcycle powertrain production in Kansas City, and production of Sportster motorcycle powertrains in Wauwatosa will be shut down for approximately 14 weeks in 2009, including the entire fourth quarter. The Company anticipates that other production operations will be shut down for a total of approximately five weeks over the rest of 2009.

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        On a combined basis, Harley-Davidson now expects the volume reductions and restructuring activities to result in one-time charges of approximately $160 million to $190 million over the course of 2009 and 2010, an increase of $40 million from earlier estimates, including $50.0 million incurred during the first half of 2009. The Company now estimates ongoing annual savings of approximately $140 million to $150 million, or $70 million greater than previously estimated, upon completion of the announced restructuring actions. Savings in 2009 are now estimated to be $70 million to $85 million.

        York Study Underway. Since the announcement of the original consolidation plans in January, Harley-Davidson has determined that the Company’s York operations are not currently competitive or sustainable. The Company has undertaken a “two path” study to determine whether major, additional restructuring at York can achieve cost and efficiency targets to make the operations viable, or alternatively, whether the Company will relocate the York operations to another U.S. location. The Company expects to make a decision on the status of the York operations later this year.

This excerpt taken from the HOG 8-K filed Jul 16, 2009.

Cost Structure

        The Company earlier this year announced plans to consolidate its two Milwaukee-area powertrain (engine and transmission) plants into one facility; consolidate paint and frame operations at its York, Pa. facilities into one plant; and close its Franklin, Wis. Parts and Accessories distribution center and consolidate those operations with General Merchandise distribution through a third-party logistics company. In April, the Company completed the transition of its U.S. transportation fleet operations to a third-party provider as part of its restructuring initiatives.

        Powertrain Consolidation Accelerated. Production shutdowns and line rate adjustments will be implemented at Harley-Davidson powertrain operations in Menomonee Falls and Wauwatosa, Wis., and at motorcycle assembly operations in York, Pa. and Kansas City, Mo., to achieve the newly-announced unit volume reduction. As a result of the volume reduction and production shutdowns, the Company expects to accelerate and substantially complete the planned consolidation of the powertrain operations by mid-2010.

        Sportster® and V-Rod® motorcycle final assembly operations and V-Rod motorcycle powertrain production in Kansas City, and production of Sportster motorcycle powertrains in Wauwatosa will be shut down for approximately 14 weeks in 2009, including the entire fourth quarter. The Company anticipates that other production operations will be shut down for a total of approximately five weeks over the rest of 2009.

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        On a combined basis, Harley-Davidson now expects the volume reductions and restructuring activities to result in one-time charges of approximately $160 million to $190 million over the course of 2009 and 2010, an increase of $40 million from earlier estimates, including $50.0 million incurred during the first half of 2009. The Company now estimates ongoing annual savings of approximately $140 million to $150 million, or $70 million greater than previously estimated, upon completion of the announced restructuring actions. Savings in 2009 are now estimated to be $70 million to $85 million.

        York Study Underway. Since the announcement of the original consolidation plans in January, Harley-Davidson has determined that the Company’s York operations are not currently competitive or sustainable. The Company has undertaken a “two path” study to determine whether major, additional restructuring at York can achieve cost and efficiency targets to make the operations viable, or alternatively, whether the Company will relocate the York operations to another U.S. location. The Company expects to make a decision on the status of the York operations later this year.

This excerpt taken from the HOG 8-K filed Apr 16, 2009.

Cost Structure

        The Company is proceeding on schedule with its previously announced volume reduction and plans for consolidating production operations. Planning also continues on schedule for the consolidation of Parts and Accessories and General Merchandise distribution through a third-party provider. In early April, the Company completed the transition of its U.S. transportation fleet operations to a third-party provider.

        In January, the Company initially had estimated that the planned volume reduction and restructuring actions would result in the elimination of about 1,100 jobs over the course of 2009 and 2010, consisting of about 300 non-production, primarily salaried positions and about 800 hourly production positions. The Company now estimates that an additional 300 to 400 hourly production jobs will be eliminated.

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        “We don’t make any job reduction decisions lightly,” said Ziemer. “But based on further planning since January and a deeper analysis of our production requirements, we have now determined that fewer production employees will be required. We will continue to work with the union leadership as we move forward, and as always, we will appropriately manage Harley-Davidson based on business conditions and the needs of the marketplace.”

        On a combined basis, Harley-Davidson expects the volume reduction and restructuring activities to result in one-time charges of approximately $120 million to $150 million over the course of 2009 and 2010, including $34.9 million incurred during the first quarter of 2009. The Company now estimates ongoing annual savings of approximately $70 million to $80 million upon completion of the restructuring actions, with 2009 savings estimated to be $20 million to $25 million and 2010 savings estimated to be $40 million to $55 million.

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